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Shell helps top-up partners' profitability

Graeme P. Chatham Ltd has four sites, two Honda and two Skoda. Three are in the Edinburgh area and the newest Skoda dealership is in nearby Dunfermline, Fife. The company sells 800 new Hondas (retail and fleet) and 450 new Skodas (retail only) a year, with a 1:1 new to used sales ratio.

“We have been a Shell dealer for more than 30 years and we see them very much as a partner rather than just a supplier,” said managing director Campbell Chatham. “The three Edinburgh sites are all Shell, while the Fife dealership is Castrol. We explained to Shell that we wanted to have an alternative and they were fine with that.  “We work very closely with Shell on all their initiatives.

For example, they are currently running a special scheme for customers to win a drive in a Ferrari. Our service director has had an excellent relationship with all their area managers and the Shell brand is recognised and trusted by our customers. The manufacturer is leaning towards other oil brands, but we will resist that as much as we
can because we feel well looked after by Shell.”

As to added benefits, he continued: “We get a lot of very good training through our manufacturers, but we like to have a view from outside of that. Oil is a major part of profitability on the aftersales side and Shell keeps us on the straight and narrow with databases and how the market is going.”

Price is always a key consideration when choosing a lubricants supplier and many dealers chop and change quite frequently.

“On the back of a review in 2008 many people were ruthless in who they chose as an oil partner,” said Chatham. “We think it is better to stick with Shell rather than move to a name that customers do not know. Of course, the price has to be right as well. Just saying you are good is not enough – you have to be able to back it up and Shell has done that over a number of years.”

On top-up sales, he said: “With Honda now highlighting the need to use the correct grade for each diesel engine we are just getting organised with having the right top-up oil for the right customer.

“Some dealers include this in the service price, but we like to tell our customers exactly what we are doing and give them the option. We have to be careful not to overstep the mark when dealing with customers outside the warranty. We put a lot of effort into our aftersales and do regular coffee mornings to strengthen relationships with our customers.”

A few months after buying a car from Chathams customers are invited to visit the service department for a presentation on how to look after their car.

Clearly proud of this proactive approach, Chatham said: “About 10% of customers come to these events and we go through things like getting the most out of the air con system, changing a wheel and checking the oil level. The customers get to meet the mechanics and the service manger and it is amazing the questions that people ask. We get a lot of feedback and it works well.

“Shell is very happy to support us in this and they supply us with key rings and pens for goodie bags. We are very conscious not to try to make money out of people on that morning – it is about making sure we build lasting relationships.

“It does not matter whether their car cost £3k or £30k all our customers get the same treatment.”

As for prospects for the remainder of 2010, Chatham said: “The biggest challenge is getting the staffing level right. Like many others we had to make some redundancies to meet the market conditions and in many ways we are having the year that we thought we were going to have last year.

“Scrappage was a pleasant surprise and last year was pretty good financially. It is interesting that Ford are bringing prices down and that will have an impact.”
Down the M8 in Ayr another Shell devotee, Ingram Motors, has two retail outlets (one VW and one Skoda) plus a paint and repair facility. The company sells 1,000 new Volkswagens (retail and fleet) every year and a similar number of Skodas, along with around 750 used vehicles.

Managing director Malcolm Ingram said: “I have been in the family business for 25 years and we have been with Shell for as long as I can remember.
“They get a big thumbs up from us because they are an easy company to work with and we find them to be very supportive. Their people are easy to get hold of and they provide on-site training if needs be. They understand the business is constantly changing and they change with it. They are also very professional in everything they do and we get business support as part of our current contract. It means we get a financial injection for the duration of the contract and can buy lubricants at a pre-set rate.”

Ingram said: “We have Shell point-of-sale material and top-up oil for sale in the reception areas at both of our dealerships. They are a blue chip company and to have them as a supplier is a good story for us – it reflects well on our business. It also reflects well on them that our relationship has stood the test of time.”

When it comes to disposing of waste oil, both dealers subcontract to local specialists.
Looking ahead, Ingram said: “I am very concerned about the second half of this year and next year because the market is still very stagnated. I think the plate change in September will be okay at best.”

On January’s VAT hike, he added: “It was inevitable because the country is skint and something had to be done about it. It would have been worse if it had been brought in immediately. Now at least we can brace ourselves and prepare our customers.”

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